UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
¨ TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to ________
Commission File Number 000-05391
METWOOD, INC.
(Exact name of registrant as specified in its
charter)
NEVADA |
|
83-0210365 |
(State or other jurisdiction |
|
(IRS Employer |
of incorporation or organization) |
|
Identification No.) |
819 Naff Road, Boones Mill, VA 24065
(Address of principal executive offices) (Zip
code)
(540) 334-4294
(Registrant's telephone number, including area
code)
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ¨
No x
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, if any, every interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter
period that the registrant was required to submit and post such files).
Yes ¨
No x
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined by Rule 12b-2 of the Exchange Act:
Large accelerated filer ¨ |
Non-accelerated filer ¨ |
Accelerated filer ¨ |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act):
Yes ¨
No x
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (no shares of preferred stock were issue and outstanding).
Common Stock, $.001 Par Value - 15,221,647 shares
as of May 13, 2015
Transitional Small Business Disclosure Format: Yes ¨
No x
PART 1
FINANCIAL INFORMATION
As used in these footnotes, “we,”
“us,” “our,” “Metwood,” “Company,” or “our company” refers to Metwood,
Inc. and its subsidiaries.
ITEM 1. INTERIM CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES
General
The accompanying reviewed interim unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not
include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash
flows, and stockholders' equity in conformity with generally accepted accounting principles applicable in the United States of
America. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated
financial statements included in our Company's annual report on Form 10-K for the year ended June 30, 2014. In the opinion of
management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31,
2015 are not necessarily indicative of the results that can be expected for the year ending June 30, 2015.
METWOOD, INC.
TABLE OF CONTENTS - FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED MARCH
31, 2015 AND 2014
TABLE OF CONTENTS
METWOOD, INC.
BALANCE SHEETS
| |
(UNAUDITED) | | |
| |
| |
March 31, | | |
June 30, | |
| |
2015 | | |
2014 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 73,826 | | |
$ | 36,836 | |
Accounts receivable, net | |
| 164,633 | | |
| 149,671 | |
Inventory | |
| | | |
| | |
Raw materials | |
| 576,589 | | |
| 721,158 | |
Work in process | |
| 174,153 | | |
| 94,034 | |
Total inventory | |
| 750,742 | | |
| 815,192 | |
Other current assets | |
| 33,587 | | |
| 44,356 | |
| |
| | | |
| | |
Total current assets | |
| 1,022,788 | | |
| 1,046,054 | |
| |
| | | |
| | |
Property and Equipment | |
| | | |
| | |
Leasehold and land improvements | |
| 342,828 | | |
| 342,828 | |
Furniture, fixtures and equipment | |
| 78,222 | | |
| 78,222 | |
Computer hardware, software and peripherals | |
| 177,151 | | |
| 175,207 | |
Machinery and shop equipment | |
| 477,166 | | |
| 467,166 | |
Vehicles | |
| 392,751 | | |
| 387,443 | |
| |
| 1,468,118 | | |
| 1,450,866 | |
Less accumulated depreciation | |
| (1,126,154 | ) | |
| (1,071,802 | ) |
Net property and equipment | |
| 341,964 | | |
| 379,064 | |
| |
| | | |
| | |
Other Assets | |
| | | |
| | |
Deferred tax asset, net of valuation reserve | |
| 246,163 | | |
| 246,163 | |
| |
| | | |
| | |
Total other assets | |
| 246,163 | | |
| 246,163 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 1,610,915 | | |
$ | 1,671,281 | |
See accompanying notes to condensed financial
statements.
METWOOD, INC.
BALANCE SHEETS
| |
(UNAUDITED) | | |
| |
| |
March 31, | | |
June 30, | |
| |
2015 | | |
2014 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 162,707 | | |
$ | 224,262 | |
Customer deposits | |
| 24,301 | | |
| 13,166 | |
| |
| | | |
| | |
Total current liabilities | |
| 187,008 | | |
| 237,428 | |
| |
| | | |
| | |
Long-term Liabilities | |
| | | |
| | |
Due to related company | |
| 73,701 | | |
| 94,815 | |
| |
| | | |
| | |
Total long-term liabilities | |
| 73,701 | | |
| 94,815 | |
| |
| | | |
| | |
Total liabilities | |
| 260,709 | | |
| 332,243 | |
| |
| | | |
| | |
Stockholders' Equity | |
| | | |
| | |
Common stock, $.001 par, 100,000,000 shares authorized; 15,221,647 shares issued and outstanding at March 31, 2015 and June 30, 2014 | |
| 15222 | | |
| 15,222 | |
Common stock not yet issued ($.001 par, 8,150 shares) | |
| - | | |
| 8 | |
| |
| | | |
| | |
Preferred Stock, $.001 par, 40,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2015 and June 30, 2014 | |
| - | | |
| - | |
| |
| | | |
| | |
Additional paid-in capital | |
| 1,899,781 | | |
| 1,899,773 | |
Retained earnings | |
| (564,797 | ) | |
| (575,964 | ) |
| |
| | | |
| | |
Total stockholders' equity | |
| 1,350,206 | | |
| 1,339,039 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 1,610,915 | | |
$ | 1,671,282 | |
See accompanying notes to condensed financial
statements.
METWOOD, INC.
STATEMENTS OF INCOME (UNAUDITED)
| |
Three Months Ended | | |
Nine Months Ended | |
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
REVENUES | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Gross sales | |
$ | 441,265 | | |
$ | 355,267 | | |
$ | 1,332,472 | | |
$ | 1,431,251 | |
Cost of sales | |
| (184,931 | ) | |
| (273,415 | ) | |
| (722,532 | ) | |
| (901,658 | ) |
Gross profit | |
| 256,334 | | |
| 81,852 | | |
| 609,940 | | |
| 529,593 | |
| |
| | | |
| | | |
| | | |
| | |
ADMINISTRATIVE EXPENSES | |
| | | |
| | | |
| | | |
| | |
Advertising | |
| 2,678 | | |
| 9,592 | | |
| 15,587 | | |
| 15,510 | |
Depreciation | |
| 6,894 | | |
| 5,958 | | |
| 20,681 | | |
| 15,786 | |
Insurance | |
| 8,458 | | |
| 5,466 | | |
| 23,456 | | |
| 16,573 | |
Payroll expenses | |
| 91,835 | | |
| 122,331 | | |
| 286,936 | | |
| 346,748 | |
Professional fees | |
| 7,299 | | |
| 7,099 | | |
| 41,723 | | |
| 29,372 | |
Rent | |
| 14,810 | | |
| 18,710 | | |
| 53,430 | | |
| 55,735 | |
Vehicle | |
| 3,595 | | |
| 4,259 | | |
| 15,308 | | |
| 17,697 | |
Other | |
| 74,708 | | |
| 43,742 | | |
| 127,129 | | |
| 99,787 | |
Total administrative expenses | |
| 210,277 | | |
| 217,157 | | |
| 584,250 | | |
| 597,208 | |
| |
| | | |
| | | |
| | | |
| | |
Operating income (loss) | |
| 46,057 | | |
| (135,305 | ) | |
| 25,690 | | |
| (67,615 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other expense | |
| (1,756 | ) | |
| 144 | | |
| (10,639 | ) | |
| 95 | |
| |
| | | |
| | | |
| | | |
| | |
Intereset Expense | |
| (1,169 | ) | |
| (1,438 | ) | |
| (3,884 | ) | |
| (7,751 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before income taxes | |
| 43,132 | | |
| (136,599 | ) | |
| 11,167 | | |
| (75,271 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income tax expense (benefit) | |
| 1,984 | | |
| (13,496 | ) | |
| - | | |
| (2,590 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) from operations | |
$ | 41,148 | | |
$ | (123,103 | ) | |
$ | 11,167 | | |
$ | (72,681 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted deficit per share | |
$ | ** | | |
$ | (0.01 | ) | |
$ | ** | | |
$ | ** | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares | |
| 15,221,647 | | |
| 15,221,647 | | |
| 15,221,647 | | |
| 15,221,647 | |
**Less than $0.01
See accompanying notes to condensed financial
statements.
METWOOD, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
| |
Nine Months Ended | |
| |
March 31, | |
| |
2015 | | |
2014 | |
OPERATIONS | |
| | | |
| | |
Net income (loss) | |
$ | 11,166 | | |
$ | (72,681 | ) |
Adjustments to reconcile net income (loss)to net cash provided by (used in) from operating activities: | |
| | | |
| | |
Depreciation | |
| 54,352 | | |
| 53,043 | |
Reversal of deferred income taxes | |
| - | | |
| (2,590 | ) |
(Increase) decrease in operating assets: | |
| | | |
| | |
Accounts receivable | |
| (15,566 | ) | |
| 51,891 | |
Prepaid expenses | |
| 9,068 | | |
| - | |
Inventory | |
| 64,450 | | |
| (67,891 | ) |
Other operating assets | |
| 2,305 | | |
| 30,160 | |
Decrease in operating liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
| (50,419 | ) | |
| (30,247 | ) |
Net cash provided by (used in) operating activities | |
| 75,356 | | |
| (38,315 | ) |
| |
| | | |
| | |
INVESTING | |
| | | |
| | |
Capital asset expenditures | |
| (17,252 | ) | |
| (60,518 | ) |
Net cash used in investing activities | |
| (17,252 | ) | |
| (60,518 | ) |
| |
| | | |
| | |
FINANCING | |
| | | |
| | |
Decrease in borrowings from related party | |
| (21,114 | ) | |
| (3,767 | ) |
Net cash used in financing activities | |
| (21,114 | ) | |
| (3,767 | ) |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| 36,990 | | |
| (102,600 | ) |
| |
| | | |
| | |
Cash, beginning of the year | |
| 36,836 | | |
| 174,650 | |
| |
| | | |
| | |
Cash, end of the period | |
$ | 73,826 | | |
$ | 72,050 | |
See accompanying notes to condensed financial
statements
METWOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
NOTE 1 - ORGANIZATION AND OPERATIONS
The Company was incorporated under the laws
of the State of Wyoming on June 19, 1969. On January 28, 2000, the Company, through a majority shareholder vote, changed its domicile
to Nevada through a merger with EMC Energies, Inc., a Nevada corporation. The Company also changed its par value to $.001 and the
amount of authorized common stock to 100,000,000 shares.
Prior to 1990, the Company was engaged in the
business of exploring for and producing oil and gas in the Rocky Mountain and mid-continental areas of the United States. The Company
liquidated substantially all of its assets in 1990 and was dormant until June 30, 2000, when it acquired, in a stock-for-stock,
tax-free exchange, all of the outstanding common stock of a privately held Virginia corporation, Metwood, Inc. ("Metwood"),
which was incorporated in 1993. Metwood has been in the metal and metal/wood construction materials manufacturing business since
1992. Following the acquisition, the Company approved a name change from EMC Energies, Inc. to Metwood, Inc.
Effective January 1, 2002, Metwood acquired
certain assets of Providence Engineering, PC ("Providence"), a professional engineering firm with customers in the same
proximity as Metwood, for $350,000 and accounted for the transaction under the purchase method of accounting. As of June 30, 2012,
Providence was no longer an operating segment of the Company. We concluded that the majority of the engineering portion of the
business can best be handled through a strategic partnership with an outside engineering firm. We believe that continuing research
and development efforts will soon enable us to meet code requirements for our products and will eliminate the need for individual
engineering seals.
Metwood provides construction-related products
and engineering services to residential customers and contractors, commercial contractors, developers and retail enterprises, primarily
in southwestern Virginia.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
PRACTICES
Basis of Presentation
- The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine-month periods ended March 31, 2015 are not necessarily
indicative of the results that may be expected for the year ended June 30, 2015. The condensed balance sheet at June 30, 2014 has
been derived from the audited financial statements at that date but does not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated
financial statements and footnotes thereto included in Metwood, Inc.'s annual report on Form 10-K for the year ended June 30, 2014.
Fair Value of Financial
Instruments - For certain of the company's financial instruments, none of which are held for trading, including cash, accounts
receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.
Management's Use of Estimates
- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Accounts Receivable - We grant
credit in the form of unsecured accounts receivable to our customers based on an evaluation of their financial condition. We perform
ongoing credit evaluations of our customers. The estimate of the allowance for doubtful accounts, which is charged off to bad
debt expense, is based on management’s assessment of current economic conditions and historical collection experience with
each customer. At March 31, 2015, the allowance for doubtful accounts was $7,633. Specific customer receivables are considered
past due when they are outstanding beyond their contractual terms and are charged off to bad debt expense when they are determined
to be uncollectible. For the three and nine months ended March 31, 2015 and 2014, the net amount of bad debts charged off was
$244 and $-0-, respectively.
Inventory - Inventory, consisting of
metal and wood raw materials, is located on our premises and is stated at the lower of cost or market using the first-in, first-out
method.
Property and Equipment
- Property and equipment are recorded at cost and include expenditures for improvements when they substantially increase the productive
lives of existing assets. Maintenance and repair costs are expensed to operations as incurred. Depreciation is computed using the
straight-line method over the assets' estimated useful lives, which range from three to forty years. When a fixed asset is disposed
of, its cost and related accumulated depreciation are removed from the accounts. The difference between undepreciated cost and
the proceeds is recorded as a gain or loss.
Impairment of Long-lived
Assets - We evaluate our long-lived assets for indications of possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amounts
to the future net undiscounted cash flows which the assets are expected to generate. Should an impairment exist, the impairment
would be measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising
from the asset. There have been no such impairments of long-lived assets through March 31, 2015.
Patents - We have been assigned several
key product patents developed by certain company officers. No value has been recorded in our financial statements because the fair
value of the patents was not determinable within reasonable limits at the date of assignment.
Revenue Recognition - Revenue
is recognized when goods are shipped and earned or when services are performed, provided collection of the resulting receivable
is probable. If any material contingencies are present, revenue recognition is delayed until all material contingencies are eliminated.
Further, no revenue is recognized unless collection of the applicable consideration is probable.
Income Taxes - Income taxes are
accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes." A deferred tax asset or liability is recorded
for all temporary differences between financial and tax reporting and for net operating loss carryforwards, where applicable. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes
in tax laws and rates on the date of enactment.
Research and Development
- We perform research and development on our metal/wood products, new product lines, and new patents. Costs, if any, are expensed
as they are incurred. Research and development costs for the three and nine months ended March 31, 2015 were $-0- and $5,092, respectively.
Research and development costs for the three and nine months ended March 31, 2014 were $800 and $4,930, respectively.
Earnings Per Common Share
- Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted
earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options,
warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. This presentation has
been adopted for the quarters presented. There were no adjustments required to net income for the years presented in the computation
of diluted earnings per share.
Recent Accounting Pronouncements
– In April 2015, the Financial Accounting Standards Board (“FASB”) issued Update 2015-03—Interest-Imputation
of Interest (Subtopic 835-30):Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance
costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected
by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements
issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We do not expect this
ASU to have a material impact on our financial statements.
In January 2015, FASB issued Update No. 2015-01—Income
Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. It is effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments
prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial
statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.
The effective date is the same for both public business entities and all other entities. We do not expect this ASU to have a material
impact on our financial statements.
In December 2014, FASB issued Accounting Standards
Update (“ASU”) No. 2014-18—Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets
in a Business Combination (a consensus of the Private Company Council). This standard requires that existing customer-related
intangible assets and noncompetition agreements shall continue to be measured in accordance with Topic 350 and should not be subsumed
into goodwill upon adoption of this guidance. This standard is effective for the first transaction within the scope of the accounting
alternative that occurs in fiscal years beginning after December 15, 2015 and for interim and annual periods thereafter. If the
first transaction occurs in a fiscal year beginning after December 15, 2016, then this is effective for the interim period that
includes the date of the transaction and for interim and annual periods thereafter. We do not expect this ASU to have a material
impact on our financial statements.
NOTE 3 - EARNINGS PER SHARE
Net income (loss) and earnings per share for the three and nine
months ended March 31, 2015 and 2014 are as follows:
| |
For the Three Months Ended | | |
For the Nine Months Ended | |
| |
March 31, | | |
March 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net income (loss) | |
$ | 41,148 | | |
$ | (123,103 | ) | |
$ | 11,166 | | |
$ | (72,681 | ) |
Earnings per share - basic and fully diluted | |
| $ ** | | |
$ | (0.01 | ) | |
$ | ** | | |
$ | ** | |
Weighted average number of shares | |
| 15,221,647 | | |
| 15,221,647 | | |
| 15,221,647 | | |
| 15,221,647 | |
**Less than $0.01
NOTE 4 – SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information
for the three and nine months ended March 31, 2015 and 2014 are summarized as follows:
| |
For the Three Months Ended | | |
For the Nine Months Ended | |
| |
March 31, | | |
March 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Cash paid for: | |
| | | |
| | | |
| | | |
| | |
Income taxes | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Interest (Related Party) | |
$ | 1,169 | | |
$ | 1,438 | | |
$ | 3,884 | | |
$ | 7,751 | |
NOTE 5 - RELATED-PARTY TRANSACTIONS
From time to time, we contract with a company
related through common ownership for building and grounds-related maintenance services. The related party is Cahas Mountain Properties
in which Robert Callahan, our Chief Executive Officer, is a Managing Member. Fees paid to the related company for the three and
nine months ended March 31, 2015 were $-0- and $-0-, respectively. Fees paid for the three and nine months ended March 31, 2014
were $-0- and $2,585, respectively. For the three and nine months ended March 31, 2015, we had sales of $4,200 and $28,114, respectively,
to the company referred to above. For the three and nine months ended March 31, 2014, we had sales of $12,068 and $17,303, respectively
to the company. As of March 31, 2015 and 2014, the related receivable was $-0- and $-0-, respectively. See also Note 6.
NOTE 6 - OPERATING LEASE COMMITMENTS
On January 3, 2005, the Company entered into
a ten-year commercial operating lease with a company related through common ownership. The related party is Cahas Mountain Properties
in which Robert Callahan, our Chief Executive Officer, is a Managing Member. The lease covers various buildings and property which
house our manufacturing plant, executive offices and other buildings with a current monthly rental of $5,500. The lease expired
on December 31, 2014, and discussions are currently ongoing as this lease is renegotiated. For the three-month periods ended March
31, 2015 and 2014, we recognized rent expense for these spaces of $14,810 and $18,710. For the nine-month periods ended March 31,
2015 and 2014, we recognized rent expense of $53,430 and $55,735, respectively.
NOTE 7 – CONCENTRATIONS OF CUSTOMER RISK
For the three and nine months ended March 31,
2015, two customers individually accounted for 10% or more of our company’s revenues; however, there is no customer whose
loss would have a material adverse effect on our company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis
of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial
statements and notes included herein. Further, this MD&A should be read in conjunction with the “Business” and
“Risk Factors” sections within this Quarterly Report on Form 10-Q.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Included in this interim report are "forward-looking"
statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") as well as historical
information. Some of our statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
and the Notes to Financial Statements and elsewhere in this report constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe
that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations
reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated
in forward-looking statements as a result of certain factors, including matters described in the section titled "Risk Factors."
Forward-looking statements include those that use forward-looking terminology, such as the words "anticipate," "believe,"
"estimate," "expect," "intend," "may," "project," "plan," "will,"
"shall," "should," and similar expressions, including when used in the negative. Although we believe that the
expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties
and we cannot assure you that actual results will be consistent with these forward-looking statements. We claim the protection
afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Consequently, all of the forward-looking statements made in this
Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management
will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business
operations. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances
after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.
On October 1, 2013, the Company filed with
the Nevada Secretary of State a Certificate of Amendment to the Company's Articles of Incorporation. The Amendment was approved
by a "Unanimous Written Consent of The Board of Directors of Metwood, Inc." on August 6, 2013, pursuant to the authority
granted them by a "Written Consent of the Holders of a Majority of the Voting Shares of Metwood, Inc." dated August 6,
2013. The information regarding this issue was fully disclosed in the Company's Form 8-K Report filed on October 2, 2013. The Amendment
incorporated the following changes:
a. The total number of shares of preferred
stock that the Corporation is authorized to issue is
40,000,000 shares with a par value of $0.001
per share.
b. Grant to the Board of Directors the full
right and authority to increase or otherwise change the authorized shares of common stock and preferred stock without any shareholder
action or approval.
c. Grant to the Board of Directors the full
right and authority to change the name of the corporation
at a future date without any shareholder action
or approval.
Description of Business
Overview of Our Company
We have been in the metal and metal/wood construction
materials manufacturing business since 1992. Our Company manufactures light-gage steel construction materials, usually combined
with wood or wood fasteners, for use in residential and commercial applications in place of more conventional wood products, which
are inferior in terms of strength and durability. The steel and steel/wood products allow structures to be built with increased
load strength and structural integrity and fewer support beams or support configurations, thereby allowing for structural designs
that are not possible with wood-only products.
Our primary products and services are:
· TUFF BEAM - internally reinforced
cold-formed steel beam
· TUFF JOIST - cold-formed steel
joint system
· TUFF JOIST+ - internally reinforced
cold-formed steel joist
· TUFF FLOOR SYSTEM - combinations of TUFFBEAM,
NUJOIST and TUFFJOIST are utilized to make up a complete floor system
· TUFF DECK - concrete deck systems
· RIM BEAM - internally reinforced
CFS load distribution member
· TUFF FRAME 3.5 & 5.5 - a fully
proprietary panelized load bearing and non-load bearing
CFS wall framing solution
· TUFF TRUSS 2.0 - a proprietary roof
and floor truss system
· Aegis - Metwood is a distributor
of Aegis Metal Framing's cold-formed steel trusses
SURE-SPAN™
· Trimmable square columns
· Joist reinforcers
· Engineering, design and custom building
services
Residential builders are aware of the superiority
of steel framing vs. wood framing, insofar as steel framing is lighter; stronger; termite, pest, rot and fire resistant; and dimensionally
more stable in withstanding induced loads. Although we believe the use of steel framing in residential construction has generally
increased each year since 1980, many residential builders have been hesitant to utilize steel due to the need to retrain framers
and subcontractors who are accustomed to a "stick-built" construction method where components are laid out and assembled
with nails and screws. Our Company's founders saw the need to combine the strength and durability of steel with the convenience
and familiarity of wood and wood fasteners.
Our management is continually performing ongoing
product research and development. Through a strategic partnership with an outside engineering firm, we are able to offer our customers
civil engineering capabilities which include rezoning and special use submissions; erosion and sediment control and storm-water
management design; residential, commercial, and religious facility site development design; and utility design, including water,
sewer and onsite treatment systems.
We also perform a variety of structural design
and analysis work, successfully providing solutions for many projects, including retaining walls, residential framing, commercial
building framing, light-gage steel fabrication drawings, metal building retrofits and additions, mezzanines, and seismic anchors
and restraints.
Our company has designed numerous foundations
for a variety of structures. Our foundation design expertise includes metal building foundations, traditional building construction
foundations, atypical foundations for residential structures, tower foundations, and sign foundations for a variety of uses and
applications.
We have also designed and drafted full building
plans for several applications. When subcontracting for local companies, we have the ability, in partnership with our outside engineering
firm, to provide basic architectural, mechanical, electrical, and detailed civil and structural design services for these facilities.
We have reviewed designs by manufacturers for
a variety of structures and structural components, including retaining walls, radio towers, tower foundations, sign foundations,
timber trusses, light-gage steel trusses, and light-gage steel beams. This service enables clients to take generic designs and
have them certified and approved for construction in the desired locality.
Distribution Methods of Products and Services
Our sales are primarily wholesale, directly
to lumberyards, home improvement stores, hardware stores, and plumbing and electrical suppliers in Virginia and North Carolina.
Our company relies primarily on its own sales force to generate sales; additionally, however, we have distributors in Virginia,
New York, Oklahoma, Arizona and Colorado and also utilize the salespeople of wholesale yards stocking our products as an additional
sales force. We are an authorized vendor for Lowe's, Home Depot, 84 Lumber, ProBuild, and many more. We have several stocking dealers
of our square columns and reinforcing products. We will sell directly to contractors in areas where we do not have a dealer, but
with our national dealer relationships, we typically have a dealer to use. Our management intends to continue expanding the wholesale
marketing of its unique products to retailers, to increase dealer sales, and to license our technology and products to increase
its distribution outside of Virginia, North Carolina and the South.
Seasonality of Market
Our sales are subject to seasonal impacts,
as our products are used in residential and commercial construction projects which tend to be at peak levels in Virginia and North
Carolina between the months of March and October. Accordingly, our sales are greater in our fourth and first fiscal quarters. We
build an inventory of our products throughout the winter and spring to support our sales season. Due to the seasonality of our
local market, we are continuing our efforts to expand into markets that are not so seasonally impacted. We have shipped projects
to Florida, Georgia, South Carolina, Arizona, Washington, and more. These markets have some seasonality, but increased exposure
in these markets wil help maintain stronger sales year round.
Competition
Nationally, we believe there are over one hundred
manufacturers of the types of products produced by our Company. However, we contend that the majority of these manufacturers are
using wood-only products or products
without metal reinforcement. Our management
has identified only one other manufacturer in the United States that manufactures a cold-formed steel beam. However, we have often
found that our products are the only ones that will work within many customers' design specs.
Sources and Availability of Raw Materials and the Names of Principle
Suppliers
All of the raw materials we use are readily
available on the market from numerous suppliers. The light-gage metal used by the company is supplied primarily by Telling Industries,
Nuconsteel, New Millenium, Allied Tube & Conduit, and Vulcraft. Our main source of lumber is BlueLinx. Adelphia Metals, Re-Steel,
Nucor and Gerdau Amersteel provide the majority of our rebar. Because of the number of suppliers available to us, our decisions
in purchasing materials are dictated primarily by price and secondarily by availability. We do not anticipate a lack of supply
to affect our production; however, a shortage might cause us to pass on higher materials prices to our buyers.
Dependence on One or a Few Major Customers
For the three and nine months ended March 31,
2015, two customers individually accounted for 10% or more of our company’s revenues; however, there is no customer whose
loss would have a material adverse effect on our company.
Patents
We have nine U.S. Patents:
U.S. Patent Nos. 5,519,977 and 7,347,031, "Joist Reinforcing
Bracket," a bracket that reinforces wooden joists with a hole for the passage of a utility conduit. The Company refers to
this as its floor joist patch kit.
U.S. Patent No. 5,625,997, "Composite Beam," a composite
beam that includes an elongated metal shell and
a pierceable insert for receiving nails, screws or other penetrating
fasteners.
U.S. Patent No. 5,832,691, "Composite Beam," a
composite beam that includes an elongated metal shell and a pierceable insert for receiving nails, screws or other
penetrating fasteners. This is a continuation-in-part of
U.S. Patent No. 5,921,053, "Internally Reinforced Girder
with Pierceable Nonmetal Components," a girder that includes a pair of c-shaped members secured together so as to form a
hollow box, which permits the girder
U.S. Patent Nos. D472,791S, D472,792S, D472,793S, and D477,210S,
all modifications of Metwood's Reinforcing Bracket, which will be used for repairs of wood I-joists.
Need for Government Approval of Principal Products
Our products must either be sold with an
engineer's seal or applicable building code approval. Currently, we are seeking International Code Council ("ICC")
code approval on our TUFFBEAMS. Once that approval is obtained, our products can be used in all fifty states and will
eliminate the need for an engineer's seal on individual products. To date, our company's 2x10 floor joist reinforcer has
received both Bureau Officials Code Association approval (2001) and ICC approval (2004).
Time Spent During the Last Two Fiscal Years on Research and Development
Activities
Approximately fifteen percent of our time and resources has been
spent during the last two fiscal years researching and developing our metal/wood products, new product lines, and new patents.
We have performed several tests with NTA, Inc. to achieve a cold compliance report on our TUFFBEAM and TUFFJOIST product lines.
Costs and Effects of Compliance with Environmental Laws
We do not incur any costs to comply with environmental laws. We
are an environmentally friendly business in that our products are fabricated from recycled steel.
Number of Total Employees and Number of Full-Time Employees
The Company had fourteen employees at March 31, 2015, thirteen of
whom were full time.
Changes in Results of Operations
We had net income of $41,148 for the three
months ended March 31, 2015 compared to a net loss of $123,103 for the three months ended March 31, 2014 and net income of $11,166
for the nine months ended March 31, 2015 versus a net loss of $72,681 for the nine months ended March 31, 2014. Gross profit increased
$164,251 for the three months ended March 31, 2015 compared to 2014, and $80,847 comparing the nine-month period in 2015 to 2014.
Materials costs decreased significantly due to greater production efficiencies and supplier agreements that lowered materials prices.
Savings in payroll and other administrative expenses accounted for the profitable three and nine months ended March 31, 2015 compared
to the same periods in 2014 and also helped to lower administrative costs comparing the periods ending March 31, 2015 to 2014.
Liquidity
and Capital Reserves – at March 31, 2015 we had cash of $73,826 compared to $36,836 at June 30, 2014.
Cash
flows provided by operating activies for the nine months ended March 31, 2015 were $75,356 versus net cash used for operating activities
of $38,315 for the nine months ended March 31, 2014. The increase in cash flows from operations for the period ended March 31,
2015 was primarily attributable to decreases in inventory and increases in accounts payable and accrued expenses.
Cash
flows used for investing activities were $17,252 for the nine months ended March 31, 2015 compared to $60,518 for the same period
in 2014 and were for the purchase of capital assets.
Cash
flows used for financing activities for the nine months ended March 31, 2015 were $21,114 compared to $3,767 for the nine months
ended March 31, 2014 and were for repayments of borrowings from a related party.
We have
historically funded our cash needs through operating income and credit line draws as needed. We will continue to rely on
sales revenue as our main source of liquidity and will incur debt primarily to fund inventory purchases as sales growth produces
increased product demand. Liquidity needs that cannot be met by current sales revenue may also arise in certain unusual circumstances
such as has previously occurred when rain and snow significantly slowed construction activity and resulted in a corresponding decline
in demand for our products. In those circumstances, debt may be added to meet our fixed costs and to maintain inventory in
anticipation of a spurt in product demand that generally occurs once a weather-related slowdown has ended.
On a
long-term basis, we also anticipate that product demand will increase considerably once we get awarded our Code Compliance Report.
As sales increase, we can add a second shift to meet the additional product demand without having to use funds to expand our production
facilities. If additional cash becomes necessary to fund our growth, we may raise this capital through an additional follow-on
stock offering rather than taking on more debt. However, there can be no assurance that we will be able to obtain additional
equity or debt financing in the future. If we are unable to raise additional capital as needed, our growth potential will
be adversely affected, and we would have to significantly modify our plans.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements
that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity
or capital expenditures.
Critical Accounting Policies
In accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”), we record certain assets at the lower of cost or fair market
value. In determining the fair value of certain of our assets, we must make judgments, estimates and assumptions regarding circumstances
or trends that could affect the value of these assets, such as economic conditions. Those judgments, estimates and assumptions
are based on information available to us at that time. Many of those conditions, trends and circumstances are outside our control
and if changes were to occur in the events, trends or other circumstances on which our judgments or estimates were based, we may
be required under U.S. GAAP to adjust those estimates that are affected by those changes. Changes in such estimates may require
that we reduce the carrying value of the affected assets on our balance sheet (which are commonly referred to as “write downs”
of the assets involved).
It is our practice to establish reserves or
allowances to record adjustments or “write-downs” in the carrying value of assets, such as accounts receivable. Such
write-downs are recorded as charges to income or increases in the expense in our Statement of Operations in the periods when such
reserves or allowances are established or increased. As a result, our judgments, estimates and assumptions about future events
can and will affect not only the amounts at which we record such assets on our balance sheet but also our results of operations.
In making our estimates and assumptions, we
follow U.S. GAAP applicable to our business and those that we believe will enable us to make fair and consistent estimates of the
fair value of assets and establish adequate reserves or allowances. Set forth below is a summary of the accounting policies that
we believe are material to an understanding of our financial condition and results of operations.
Recently Issued Accounting Pronouncements
Refer to Note 2 in the accompanying interim financial statements.
Additional Information
You are advised to read this Form 10-Q in conjunction
with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports
on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies
of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC
20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains information for electronic filers at its website http://www.sec.gov.
ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required
to provide the information required by this item.
ITEM 4 - CONTROLS AND PROCEDURES
| (a) | Evaluation of disclosure controls and procedures |
We maintain disclosure
controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide
reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15, our Chief Executive
Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance
level.
Management’s
Annual Report on Internal Control over Financial Reporting
Our Chief Executive
Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial
reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has
used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting.
Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over
financial reporting was not effective as of March 31, 2015. Management’s assessment identified the following material weaknesses
in internal control over financial reporting:
The small size of
our Company limits our ability to achieve the desired level of separation in our internal controls and financial reporting. We
do have a separate CEO and CFO; however, we do not have an Audit Committee to review and oversee the financial policies and procedures
of the Company. Until such time we are able to install an audit committee, we do not meet the full requirement for separation.
In the interim, we will continue to strengthen the role of our CEO and CFO and their review of our internal control procedures.
(b) Changes in internal control over financial reporting
We regularly review
our system of internal control over financial reporting to ensure we maintain an effective internal control environment. As we
grow geographically and with new product offerings, we continue to create new processes and controls as well as improve our existing
environment to increase efficiencies. Improvements may include such activities as implementing new, more efficient systems, consolidating
activities, and migrating processes.
There were no changes
in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
We are currently not involved in any litigation
that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting
our Company, our common stock, any of our subsidiaries or of our companies or our subsidiaries' officers or directors in their
capacities as such, in which an adverse decision could have a material adverse effect.
ITEM 1A - Risk Factors
Our business is subject to a variety of
risks and uncertainties, including, but not limited to, the risks and uncertainties described below. If any of the risks described
below, or elsewhere in this report on Form 10-Q, or our Company’s other filings with the Securities and Exchange Commission
(the "SEC") were to occur, our financial condition and results of operations could suffer, and the trading price of our
common stock could decline. Additionally, if other risks not presently known to us, or that we do not currently believe to be significant,
occur or become significant, our financial condition and results of operations could suffer, and the trading price of our common
stock could decline.
You should carefully review the risk factors
together with all other information contained in this Quarterly Report on Form 10-Q, and in prior reports pursuant to the Securities
Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. Our risk factors, including but not limited to the
risk factors listed below, are as follows:
SHOULD ONE OR MORE OF THE FOREGOING RISKS
OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS OF OUR BUSINESS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
Changing economic conditions could materially
adversely affect us - Our operations and performance depend significantly on regional and national economic conditions and
their impact on levels of spending by our customers and end users. Currently, those economic conditions have deteriorated and may
remain depressed for the foreseeable future. These changing economic conditions could have a material adverse effect on demand
for our products and on our financial condition and operating results.
Current volatility and disruption in the
capital and credit markets may continue to exert downward pressure on our stock price - The capital and credit markets have
been experiencing extreme volatility and disruption over the past year. Stock markets in general, and our stock price in particular,
have experienced significant volatility over the past year. Our stock recently traded at historic lows. In the future, there can
be no assurance that price volatility in the stock markets in general will abate or that our stock price in particular will rise.
Additionally, the volatility in the credit markets could impact our ability to access new financing.
We have a history of operating losses and
may incur future losses – Although we had net income of $11,166 for the nine months ended March 31, 2015, we had net
losses of $72,681 for the nine months ended March 31, 2014, net losses of $244,117 for the fiscal year ended June 30, 2014, and
net losses of $327,504 for the year ended June 30, 2013. Our ability to generate significant revenues and maintain profitability
is dependent in large part on our ability to expand our customer base; increase sales of our products to existing customers; manage
our expense growth; enter into additional supply, license and collaborative arrangements; and successfully manufacture and commercialize
products incorporating our technologies in new applications and in new markets.
Our common shares have been subject to penny stock regulation
in the United States of America - Our common shares have been subject to the provisions of Section 15(g) and Rule 15g-9 of
the (US) Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny
stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to
be any equity security that has a market price less than US $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides
that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities
exchange meeting specified criteria set by the Commission; issued by a registered investment company; excluded from the definition
on the basis of price (at least US $5.00 per share) or the registrant’s net tangible assets; or exempted from the definition
by the Commission. If our common shares are deemed to be “penny stock,” trading in common shares will be subject to
additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited
investors.
Financial Industry Regulatory Authority,
Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares
- In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending
an investment to a client, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
client. Prior to recommending speculative low priced securities to their non-institutional clients, broker-dealers must make reasonable
efforts to obtain information about the client’s financial status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will
not be suitable for at least some clients. FINRA requirements make it more difficult for broker-dealers to recommend that their
clients buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market
for our shares.
As a public company we are subject to complex
legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance
- As a public company, we are subject to numerous legal and accounting requirements in both Canada and the United States of
America that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in
absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience
with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure
to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required
periodic reports on a timely basis, loss of market confidence, delisting of our securities and/or governmental or private actions
against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance
will not prove to be a substantial competitive disadvantage vis-à-vis privately held and larger public competitors.
Compliance with changing regulation of corporate
governance and public disclosure will result in additional expenses and pose challenges for our management - Changing laws,
regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and
Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have
created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public
markets. Our management team needs to devote significant time and financial resources to comply with both existing and evolving
standards for public companies, which will lead to increased general and administrative expenses and a diversion of management
time and attention from revenue generating activities to compliance activities.
Because we are quoted on the OTC pink Sheets
instead of a national securities exchange, our investors may have more difficulty selling their stock or experience negative volatility
on the market price of our stock in the United States - Our common shares are quoted on the OTC Pink Sheets. The OTC Pink Sheets
is marketed as an electronic exchange for high growth and early stage companies. Trades are settled and cleared in a manner similar
to any NASDAQ or NYSE stock and trade reports are disseminated through Yahoo, Bloomberg, Reuters, and most other financial data
providers. The OTC Pink Sheets can be significantly illiquid, in part because it does not have a national quotation system by which
potential investors can follow the market price of shares except through information received and generated by a limited number
of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on
the OTC Pink Sheets as compared to a national securities exchange, such as the New York Stock Exchange, the NASDAQ Stock Market
or the NYSE Amex. This volatility may be caused by a variety of factors, including the lack of readily available price quotations,
the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors
in our common shares may experience high fluctuations in the market price and volume of the trading market for our securities.
These fluctuations, when they occur, have a negative effect on the market price for our common shares. Accordingly, our shareholders
may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial
period of time until the market for our common shares improves.
The price at which you purchase our common
shares may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common shares
at or above your purchase price, which may result in substantial losses to you. The market price for our common shares is particularly
volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history
and lack of profits which could lead to wide fluctuations in our share price - The market for our common shares is characterized
by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more
volatile than a seasoned issuer. The volatility in our share price is attributable to a number of factors. First our common shares,
at times, are thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by
our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate
demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Second,
we are a speculative or “risky” investment due to our limited operating history, lack of profits to date and uncertainty
of future market acceptance for our potential products. As a consequence, more risk-adverse investors may, under the fear of losing
all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the
market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors
are beyond our control and may decrease the market price of our common shares, regardless of our performance. We cannot make any
predictions as to what the prevailing market price for our common shares will be at any time or as to what affect that the sale
of shares or the availability of common shares for sale at any time will have on the prevailing market price.
Shareholders should be aware that, according
to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns
include control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; boiler room
practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; excessive and
undisclosed bid-ask differential and markups by selling broker-dealers; and the wholesale dumping of the same securities by promoters
and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market, management will strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our
share price.
Volatility in our common share price may
subject us to securities litigation, thereby diverting our resources that may have a material effect on our profitability and results
of operations - The market for our common shares is characterized by significant price volatility when compared to seasoned
issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.
In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility
in the market price of its securities. We may in the future be the target of similar litigation. This type of litigation could
result in substantial costs and could divert management’s attention and resources.
Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) could
have a material adverse effect on our business and our operating results - If we fail to comply with the requirements of Section
404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal
controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors
to lose confidence in our reported financial information and have a negative effect on the trading price of our common shares.
Pursuant to Section 404 of the Sarbanes-Oxley
Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting. In
connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover
“material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting
Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote
likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.
In the event that a material weakness is identified,
as it has been for this report, subject to expansion of the size of our Company and our finance department, we will employ qualified
personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process
of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes
in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal
controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will
take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over
our financial process and reporting in the future.
Any failure to complete our assessment of our
internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new controls,
or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations
or result in material misstatements in our financial statements. Any such failure could adversely affect the results of the management
evaluations of our internal controls. Inadequate internal controls could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the trading price of our common shares.
We do not intend to pay dividends - We
do not anticipate paying cash dividends on our common shares in the foreseeable future. We may not have sufficient funds to legally
pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide, in our sole discretion, not to
pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors,
and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital
requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends
in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
The current financial environment may
impact our business and financial condition that we cannot predict - The continued instability in the global financial
system and related limitation on availability of credit may continue to have an impact on our business and our financial
condition, and we may continue to face challenges if conditions in the financial markets do not improve. Our ability to
access the capital markets has been restricted as a result of the economic downturn and related financial market conditions
and may be restricted in the future when we would like, or need, to raise capital. The difficult financial environment may
also limit the number of prospects for potential joint venture, asset monetization or other capital raising transactions that
we may pursue in the future or reduce the values we are able to realize in those transactions, making these transactions
uneconomic or difficult to consummate.
We did not consummate the Global Energy Group LLC transaction
- Metwood had previously entered into a Member Interests Purchase Agreement (the "Agreement") dated June 30, 2013
with Global Energy Group LLC. The Company has determined not to consummate the transaction. The discussions regarding this Agreement
are ongoing and any failure of the parties to reach an accommodation may have material adverse effect on our financial condition
or results of operations and could divert management’s attention and resources.
ITEM 2. RECENT ISSUANCES OF UNREGISTERED
SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities
during the period ended March 31, 2015.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
There is no information with respect to which
information is not otherwise called for by this form.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. |
|
Exhibit |
3.1(a) |
|
Articles of Incorporation (1) |
3.1(b) |
|
Amendment to Articles of Incorporation(2) |
3.2 |
|
New Adopted Bylaws (1) |
31.1 |
* |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. (6)(6 (2) |
31.2 |
* |
Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
32.1 |
* |
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
32.2 |
* |
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
*filed herewith
| (1) | Incorporated by reference on Form 8-K, filed February
16, 2000 |
| (2) | Incorporated by reference on Form 8-K, filed October
2, 2013 |
See index to exhibits.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 13, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
|
|
Date: May 13, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
INDEX TO EXHIBITS
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
31.1 |
|
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2 |
|
Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 |
|
|
|
32 |
|
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18U.S.C. 1350) |
Exhibit 31.1
Certification of Chief Executive Officer
Securities Exchange Act Rule 13a-14 and 15d-14
As Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Robert M. Callahan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Metwood, Inc.; |
| | |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s third fiscal quarter) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting. |
Date: May 13, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Securities Exchange Act Rule 13a-14 and 15d-14
As Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Shawn A. Callahan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Metwood, Inc.; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s third fiscal quarter) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions): |
| e. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and |
| f. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting. |
Date: May 13, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
Exhibit 32
Certificate of
Chief Executive Officer
And Chief Financial Officer
Securities Exchange Act rules 13(a) and 15(d)
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on
Form 10-Q of Metwood, Inc. ("the Company") for the quarter ended March 31, 2015, as filed with the Securities and Exchange
Commission on the date hereof ("the Report"), each of the undersigned Chief Executive Officer and Chief Financial Officer
of the Company certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date: May 13, 2015 |
/s/ Robert M. Callahan |
|
Robert M. Callahan |
|
Chief Executive Officer |
|
|
Date: May 13, 2015 |
/s/ Shawn A. Callahan |
|
Shawn A. Callahan |
|
Chief Financial Officer |
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